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January 2013

How much buying power did starting salaries offer?

The relative buying power of the dollar in any two cities is very important when comparing the nominal dollar amounts of the salaries in those two cities. Those interested in this topic might, for example, ask about the "buying power" of a salary of $160,000 in Boston compared to a similar nominal salary in San Francisco. The question becomes, "Which location offers the most buying power?" The answer, and the dollars that accompany it, often translates into discretionary income and lifestyle options for new attorneys.

To illustrate purchasing power differentials, cities are ranked on the basis of a Buying Power Index (BPI). The BPI was calculated using New York City's median reported private practice salary for the Class of 2011 and cost of living as the benchmark. New York City's BPI is thus 1.00. BPI's for other cities show how much buying power the median reported law firm salary for the Class of 2011 in that city provides compared with the New York City median. The table below shows the BPI calculated for 76 cities for which at least 15 law firm salaries were reported for the Class of 2011 and for which cost-of living information was available. It is evident that the buying power of the median salary in more than 60% of the cities listed exceeds that of New York's when relative costs of living are factored in. For example, the median reported law firm salary in Cleveland, Detroit, and Pittsburgh is about two-thirds that of New York's, but nonetheless each offers about 40% more buying power than does the New York salary. As a second example, the buying power of the median reported salary in Raleigh, NC slightly exceeds that of New York's even though the median salary is less than half that of New York.

The difference in purchasing power between $145,000 in San Francisco and $145,000 in Wilmington, DE can be determined. The BPI in San Francisco is 1.219; that in Wilmington is 1.819. This means that the Wilmington salary offers almost half again as much purchasing power than the identical salary in San Francisco [1.819/1.219] = 1.49 or 49%. Or, viewed the other way around, the San Francisco salary offered about 67% of the purchasing power of the Wilmington salary [1.219/1.819] x 100 = 67%. Salaries in any two cities with similar salaries but different BPI's may be compared in this manner.

Likewise, the BPI can be used to compare any salary in a listed city (not just the median) with that for New York because the salary required to provide the same purchasing power as the $160,000 New York salary does not change. For example, in Atlanta, that figure is about $71,150. If the actual salary obtained in Atlanta is $100,000, it will purchase about 41% more than the $160,000 salary in New York [$100,000/$71,150] = 1.41 or 41%.

Median Reported Private Practice Salaries in Selected Cities
Ranked by Buying Power of the Salary — Class of 2011

City

Median Reported Salary

Salary required to Yield New York City Buying Power*

Buying Power Index

Dallas, TX

$135,000

$70,350

1.919

Wilmington, DE

145,000

79,710

1.819

Houston, TX

115,000

65,670

1.751

Charlotte, NC

115,000

68,230

1.686

Los Angeles, CA

160,000

97,110

1.648

Boston, MA

160,000

100,400

1.594

Costa Mesa, CA

160,000

104,350

1.533

Washington, DC

160,000

104,790

1.527

Nashville, TN

100,000

65,960

1.516

Grand Rapids, MI

97,500

65,375

1.484

Detroit, MI

100,000

68,520

1.459

Menlo Park, CA

160,000

109,910

1.456

Mountain View, CA

160,000

109,910

1.456

Palo Alto, CA

160,000

109,910

1.456

Pittsburgh, PA

100,000

69,320

1.443

Austin, TX

97,500

67,790

1.438

Newark, NJ

135,000

95,940

1.407

Cleveland, OH

104,000

74,150

1.403

Salt Lake City, UT

97,000

69,180

1.402

Birmingham, AL

90,000

64,790

1.389

Irvine, CA

140,000

104,350

1.342

New Orleans

93,000

69,910

1.330

Denver, CO

100,000

76,780

1.302

Phoenix, AZ

91,250

70,570

1.293

Seattle, WA

110,000

85,630

1.285

Atlanta, GA

90,000

71,150

1.265

Minneapolis, MN

102,000

80,880

1.261

Philadelphia, PA

115,000

91,410

1.258

Ft. Worth, TX

85,000

68,080

1.249

Milwaukee, WI

89,000

72,610

1.226

San Francisco, CA

145,000

118,980

1.219

Chicago, IL

100,000

83,880

1.192

Kansas City, MO

85,000

72,690

1.169

Tampa, FL

76,500

67,130

1.140

St. Louis, MO

75,000

66,620

1.126

Louisville, KY

75,000

67,060

1.119

Cincinnati, OH

75,000

68,230

1.099

Hartford, CT

98,500

90,530

1.088

Des Moines, IA

72,000

66,690

1.080

Charleston, WV

73,500

68,885

1.060

Richmond, VA

77,500

73,200

1.059

Alexandria, VA

110,000

104,790

1.050

San Antonio, TX

71,000

68,080

1.043

Memphis, TN

65,000

62,815

1.035

Las Vegas, NV

75,000

73,200

1.025

Raleigh, NC

70,000

68,590

1.021

New York, NY

160,000

160,000

1.000

Wichita, KS

63,000

67,420

0.934

Jacksonville, FL

64,000

68,665

0.932

Omaha, NE

60,000

65,375

0.918

Miami, FL

70,000

78,320

0.894

San Diego, CA

85,000

95,500

0.890

Madison, WI

69,000

79,050

0.873

Albuquerque, NM

60,000

69,180

0.867

W. Palm Beach, CA

70,500

81,170

0.862

Columbia, SC

60,000

69,835

0.859

Baltimore, MD

74,000

87,090

0.850

Oklahoma City, OK

56,250

66,180

0.85

Oakland, CA

84,000

99,450

0.845

Baton Rouge, LA

57,500

68,450

0.840

Tulsa, OK

55,000

65,810

0.836

Knoxville, TN

54,250

65,300

0.831

Southfield, MI

56,000

68,520

0.817

Lexington, KY

52,500

67,200

0.781

Newport Beach, CA

80,000

104,350

0.767

Boca Raton, FL

60,000

81,170

0.739

Ft. Lauderdale, FL

60,000

81,170

0.739

Orlando, FL

52,000

71,520

0.727

Little Rock, AR

50,000

69,980

0.714

Montgomery, AL

47,500

71,150

0.668

Albany, NY

54,000

81,390

0.660

Long Beach, CA

63,700

97,110

0.649

Beverly Hills, CA

60,000

97,110

0.618

Charleston, SC

45,000

72,910

0.617

Fairfax, VA

62,500

104,790

0.592

Honolulu, HI

70,000

122,710

0.571

*For ease of presentation, these figures have been rounded to the nearest $10.

Notes on Resources and Methodology for Calculating the Buying Power Index

The Buying Power Index (BPI) uses as its benchmark New York City's median starting salary and cost of living. Cost of living information was obtained from The Council for Community & Economic Research (C2ER) and its ACCRA Cost of Living Index for 2011. C2ER is a nonprofit professional organization of research staff of chambers of commerce, economic development organizations, and related organizations. C2ER obtains information through the participation of local Chambers of Commerce. C2ER uses this information to develop a cost of living index relative to a U.S. average of 100. The index measures differences in the costs of goods and services; C2ER does not attempt to incorporate tax differentials into its index. The index is not available for metropolitan areas whose Chamber(s) of Commerce do not participate.

These indices were used to create an adjusted cost of living index for each city, with New York City, rather than the U.S. average, set as 1.00. This adjusted index thus indicates the dollar amount equivalent to a dollar in New York when the cost of living differential is considered. For example, the ACCRA Cost of Living index for the Louisville, KY area is 91.7. Comparing this to New York's index of 218.8 means that $0.42 is needed in Louisville to obtain purchasing power equal to that of $1.00 in New York (91.7/218.8 = 0.4191).

This adjusted index was then used to determine how the New York median private practice salary would have to be scaled to provide comparable purchasing power in each city. Using the Louisville example, the lower cost of living means that a salary of about $67,060 is equivalent in purchasing power terms to the $160,000 salary in New York ($160,000 x 0.4191 = $67,056).

This purchasing power equivalent was then compared to the actual median reported private practice salary in each city to determine a BPI. The closer the BPI is to 1.00, the closer the salary comes to providing purchasing power on a parity with New York City. Continuing with the Louisville example, the BPI of 1.119 means that the salary has about 12% more purchasing power than the New York salary. However, a comparable $74,000 median salary reported for Baltimore, MD provides just 85% of the purchasing power of New York's median because the cost of living is higher in Baltimore compared with Louisville, though still lower than that of New York. Other cities where the reported median does not provide the purchasing power of the New York salary include Jacksonville, FL and Albany, NY. In contrast, the purchasing power in every city with a reported median of at least $90,000, exceeds that of New York.